Toronto apartment transactions were down in the first quarter compared to last year. While the first quarter of 2013 in the Greater Toronto Area as a record-breaking quarter in terms of volume, with a total of 39 completed apartment transactions, the same quarter of 2014 saw a total of 23 completed deals. More importantly, $135 million in deals closed in this quarter, compared to $544 million in deals last year’s quarter.
While the first quarter of 2013 was an anomaly, the first quarter of 2014 dollar volumes are the second-lowest in the past three years, pointing to the declining supply of deals on the market.
Cap rate
The average cap rate in the first quarter of 2014 was 5.1 per cent. This is only marginally higher than it was in the same quarter last year at 4.9 per cent. On average, the cap rate has been steadily hovering around 5 per cent for the past five years.
A few notable transactions
The biggest buyer in the first quarter was O’Shanter Developments, purchaser of two buildings (98 suites) for $25 million. This amounts to over $255,000 per suite, with a cap rate of just under 4 per cent.
220 Woolner Avenue in Toronto sold for $21.85 million to a private investor. The property consists of two apartment buildings containing 260 units.
A new Alberta purchaser, Ontario Holdings, entered the market purchasing two apartment buildings in Toronto’s Parkdale neighbourhood. The buildings contained a combined 136 suites and the purchase price was $17.625 million (about $130,000 per unit). Parkdale is seen as an improving area with many clients interested in buying there at this time.
222 Nonquon Road in Oshawa, containing 139 suites, was purchased for $70,800 per suite with an 8.2 per cent cap rate. The asset had environmental issues as well as underground garage delamination issues. The cost to cure these items will be approximately $20,000 per suite. Once complete, the value per unit will increase to $125,000.
31 Roehampton Avenue sold for $8.5 million with a 3.25 per cent cap rate to the adjoining owner/developer.
Lorenzo Digianfelice is broker of record at Commercial Focus Realty Inc. and team member of The Apartment Group. This group has sold more than $3 billion in apartments and Lorenzo can be reached at ldigianfelice@cfrealty.ca.
